Sarbanes Oxley Act

In: Business and Management

Submitted By byepez15
Words 1240
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“Sarbanes-Oxley (SOX) Act and its impact on corporate America”
In order to understand why the Sarbanes-Oxley Act came to be, it’s important to acknowledge some of the mistakes made by some companies that led to the creation of this Act. The Sarbanes-Oxley Act was originally enacted in the wake of the Enron scandal, but then pushed to congress after a series of high-profile financial scandals followed Enron, including WorldCom and Tyco that rattled investor confidence and the level of confidence that the public held in corporate America (Rouse). Enron Corporation was one of the largest energy companies in the world, marketing primarily electricity and natural gas but also provided financial risk management for its clients. Enron’s demise began in 1997 when it bought out a partner’s stake in a company (JEDI) and in turn sold that stake to another company (ChewCo) which was created, owned, and operated by Enron (Rouse). This began the multi-layered strategy of transactions that allowed the company to hide debts, report inaccurate accounting errors, making the company appear much stronger and financially sound than it was in reality (Rouse).
The Sarbanes-Oxley Act was created in 2002 by Senator Paul Sarbanes and Representative Michael Oxley and signed off by President Busch and introduced and enforced major changes to the regulation of corporate governance and financial practice. The Sarbanes-Oxley Act is arranged into eleven 'titles' ( As far as compliance is concerned, the most important sections within these eleven titles are usually considered to be 302, 401, 404, 409, 802 and 906, which I will discuss later.
Essentially, SOX is a legislation to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. The act, drafted by U.S.…...

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